Question 1

A policy of raising the minimum wage is beneficial to all low-skilled workers.

Accepted Answer

A) True 
 B)False  False

Question 2

-The table above shows the demand for and supply of rental housing in Crainsboro. The city government is considering imposing a rent ceiling of $700 a month. Help the government to analyze the effects of the proposed rent ceiling.
a) Draw the demand and supply curves. With no rent ceiling, what is the rent and how many apartments are rented?
b) With the rent ceiling, what is the rent and how many apartments are rented? What is the shortage of housing? Explain.
c) If the rent ceiling is strictly enforced, what is the maximum price that someone is willing to pay for the last unit of housing available? Is the housing market efficient? Explain.
d) If a black market develops, how high could the black market rent be? Explain your answer.

Accepted Answer

a) The figure above shows the housing market. With no rent ceiling, the equilibrium rent is $900 per month and 400 units are rented.
b) Because the rent ceiling is below the equilibrium rent, the rent equals the rent ceiling, $700. At this rent, landlords are willing to supply only 200 apartment units while consumers want to rent 800. So the quantity of housing rented is 200 units per month and there is a shortage of 600 units.
c) The demand curve shows consumers' willingness to pay. The maximum price that someone is willing to pay for the last unit of housing available is $1,000. The housing market is not efficient. With 200 apartments rented, the marginal benefit of the last apartment ($1,000) exceeds the marginal cost ($700), so there is a deadweight loss.
d) The black market rent could be as high as $1,000. With strict enforcement of the rent ceiling, the black market rent is close to the maximum price that renters are willing to pay.

Question 3

If demand is perfectly elastic, a sales tax is paid by

Accepted Answer

A)  only the buyers. 
B)  only the sellers. 
C)  both the buyers and sellers. 
D)  None of the above answers is correct. 
A)  only the buyers. 
B)  only the sellers. 
C)  both the buyers and sellers. 
D)  None of the above answers is correct. B

Question 4

We know that the minimum wage causes unemployment. So, why does the government impose a minimum wage?

Accepted Answer

The main reason for the minimum wage is

Question 5

-In the above figure, if the minimum wage is set at $6 per hour, the level of unemployment is ________ hours per week is

Accepted Answer

A)  40 million 
B)  30 million 
C)  20 million 
D)  0 
A)  40 million 
B)  30 million 
C)  20 million 
D)  0

Question 6

A sales tax on sellers a good leads to a loss of consumer surplus, but a price ceiling or a price floor on that same product will not.

Accepted Answer

A) True 
 B)False

Question 7

Discrimination based on age, race, gender, or family status very likely increases as a result of rent ceilings.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a result of a rent ceiling set below the equilibrium rent? I. equity in the housing market
II) efficient allocation of resources
III) a shortage of housing units.

Accepted Answer

A)  I and II 
B)  I and III 
C)  II only 
D)  III only 
A)  I and II 
B)  I and III 
C)  II only 
D)  III only

Question 9

-In the figure above, if a tax of $2 per widget is imposed on sellers, then the price of widgets paid by the buyer will be

Accepted Answer

A)  more than or equal to $8. 
B)  between $8 and $6. 
C)  $6. 
D)  less than $6. 
A)  more than or equal to $8. 
B)  between $8 and $6. 
C)  $6. 
D)  less than $6.

Question 10

-In the above figure, CBL is the cost of breaking the law. If it is illegal to buy, but not illegal to sell, then the price per unit will be

Accepted Answer

A)  $500. 
B)  $400. 
C)  $300. 
D)  $200. 
A)  $500. 
B)  $400. 
C)  $300. 
D)  $200.

Question 11

The buyers pay the entire sales tax levied on a good when demand is perfectly ________ or supply is perfectly ________.

Accepted Answer

A)  elastic; inelastic 
B)  elastic; elastic 
C)  inelastic; inelastic 
D)  inelastic; elastic 
A)  elastic; inelastic 
B)  elastic; elastic 
C)  inelastic; inelastic 
D)  inelastic; elastic

Question 12

A minimum wage set above the equilibrium wage will

Accepted Answer

A)  create a shortage of labor. 
B)  create a surplus of labor. 
C)  have no effect because the equilibrium level of employment is not affected by a minimum wage above the equilibrium wage. 
D)  create a lower wage rate for skilled workers than for unskilled workers. 
A)  create a shortage of labor. 
B)  create a surplus of labor. 
C)  have no effect because the equilibrium level of employment is not affected by a minimum wage above the equilibrium wage. 
D)  create a lower wage rate for skilled workers than for unskilled workers.

Question 13

-The above figure shows the market for a prescription drug. What is the equilibrium price of the drug? How many doses are purchased? Suppose the government imposes a price ceiling of $1.50 a dose. How many doses are purchased after the price ceiling is imposed?

Accepted Answer

The equilibrium price is $2.50 per dose.

Question 14

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. How much tax revenue does the government raise from this tax?

Accepted Answer

A)  $2,000 
B)  $3,000 
C)  $4,000 
D)  $6,000 
A)  $2,000 
B)  $3,000 
C)  $4,000 
D)  $6,000

Question 15

-In the above figure, a price ceiling of $4 would

Accepted Answer

A)  result in a shortage in the long run. 
B)  result in a surplus in the long run. 
C)  have no effect. 
D)  result in a surplus in the short run but have no effect in the long run. 
A)  result in a shortage in the long run. 
B)  result in a surplus in the long run. 
C)  have no effect. 
D)  result in a surplus in the short run but have no effect in the long run.

Question 16

-The above figure shows the labor market in an undeveloped nation. If the minimum wage is set at $5.00 per hour, what effect will it have on the market for low-skilled labor?

Accepted Answer

A)  The minimum wage will have no effect when set above the equilibrium wage rate. 
B)  The minimum wage will create a surplus of low-skilled labor. 
C)  The minimum wage will create a shortage of low-skilled labor. 
D)  The minimum wage will attract more labor to the low-skilled labor market and cause the wage rate to fall. 
A)  The minimum wage will have no effect when set above the equilibrium wage rate. 
B)  The minimum wage will create a surplus of low-skilled labor. 
C)  The minimum wage will create a shortage of low-skilled labor. 
D)  The minimum wage will attract more labor to the low-skilled labor market and cause the wage rate to fall.

Question 17

With rent controls set below the equilibrium rent, what mechanism might arise that moves the market closer to the efficient equilibrium?

Accepted Answer

A)  decreased search costs 
B)  black market activity 
C)  increased advertising by landlords 
D)  more favorable leases offered to tenants 
A)  decreased search costs 
B)  black market activity 
C)  increased advertising by landlords 
D)  more favorable leases offered to tenants

Question 18

When the minimum wage is set above the equilibrium wage rate, the number of hours of labor employed is determined by the ________ and the ________.

Accepted Answer

A)  supply of labor; minimum wage 
B)  demand for labor; supply of labor 
C)  supply of and demand for labor; the minimum wage 
D)  demand for labor; minimum wage 
A)  supply of labor; minimum wage 
B)  demand for labor; supply of labor 
C)  supply of and demand for labor; the minimum wage 
D)  demand for labor; minimum wage

Question 19

A sales tax on sellers of a good shifts the demand curve leftward because the tax raises the price that consumers must pay.

Accepted Answer

A) True 
 B)False

Question 20

-In the above figure, who pays the larger share of the tax?

Accepted Answer

A)  buyers 
B)  sellers 
C)  Buyers and sellers each pay the same amount of the tax and each pays $10 per compact disc. 
D)  Buyers and sellers each pay the same amount of the tax, but the amount each pays is different than $10 per compact disc. 
A)  buyers 
B)  sellers 
C)  Buyers and sellers each pay the same amount of the tax and each pays $10 per compact disc. 
D)  Buyers and sellers each pay the same amount of the tax, but the amount each pays is different than $10 per compact disc.

A policy of raising the minimum wage is beneficial to all low-skilled workers.

If demand is perfectly elastic, a sales tax is paid by

We know that the minimum wage causes unemployment. So, why does the government impose a minimum wage?

-In the above figure, if the minimum wage is set at $6 per hour, the level of unemployment is ________ hours per week is

A sales tax on sellers a good leads to a loss of consumer surplus, but a price ceiling or a price floor on that same product will not.

Discrimination based on age, race, gender, or family status very likely increases as a result of rent ceilings.

Which of the following is a result of a rent ceiling set below the equilibrium rent? I. equity in the housing market II) efficient allocation of resources III) a shortage of housing units.

-In the figure above, if a tax of $2 per widget is imposed on sellers, then the price of widgets paid by the buyer will be

-In the above figure, CBL is the cost of breaking the law. If it is illegal to buy, but not illegal to sell, then the price per unit will be

The buyers pay the entire sales tax levied on a good when demand is perfectly or supply is perfectly .

A minimum wage set above the equilibrium wage will

-The above figure shows the market for a prescription drug. What is the equilibrium price of the drug? How many doses are purchased? Suppose the government imposes a price ceiling of $1.50 a dose. How many doses are purchased after the price ceiling is imposed?

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. How much tax revenue does the government raise from this tax?

-In the above figure, a price ceiling of $4 would

-The above figure shows the labor market in an undeveloped nation. If the minimum wage is set at $5.00 per hour, what effect will it have on the market for low-skilled labor?

With rent controls set below the equilibrium rent, what mechanism might arise that moves the market closer to the efficient equilibrium?

When the minimum wage is set above the equilibrium wage rate, the number of hours of labor employed is determined by the and the .

A sales tax on sellers of a good shifts the demand curve leftward because the tax raises the price that consumers must pay.

-In the above figure, who pays the larger share of the tax?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 6: Government Actions in Markets

A policy of raising the minimum wage is beneficial to all low-skilled workers.

If demand is perfectly elastic, a sales tax is paid by

We know that the minimum wage causes unemployment. So, why does the government impose a minimum wage?

-In the above figure, if the minimum wage is set at $6 per hour, the level of unemployment is ________ hours per week is

A sales tax on sellers a good leads to a loss of consumer surplus, but a price ceiling or a price floor on that same product will not.

Discrimination based on age, race, gender, or family status very likely increases as a result of rent ceilings.

Which of the following is a result of a rent ceiling set below the equilibrium rent? I. equity in the housing market II) efficient allocation of resources III) a shortage of housing units.

-In the figure above, if a tax of $2 per widget is imposed on sellers, then the price of widgets paid by the buyer will be

-In the above figure, CBL is the cost of breaking the law. If it is illegal to buy, but not illegal to sell, then the price per unit will be

The buyers pay the entire sales tax levied on a good when demand is perfectly ________ or supply is perfectly ________.

A minimum wage set above the equilibrium wage will

-The above figure shows the market for a prescription drug. What is the equilibrium price of the drug? How many doses are purchased? Suppose the government imposes a price ceiling of $1.50 a dose. How many doses are purchased after the price ceiling is imposed?

-The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. How much tax revenue does the government raise from this tax?

-In the above figure, a price ceiling of $4 would

-The above figure shows the labor market in an undeveloped nation. If the minimum wage is set at $5.00 per hour, what effect will it have on the market for low-skilled labor?

With rent controls set below the equilibrium rent, what mechanism might arise that moves the market closer to the efficient equilibrium?

When the minimum wage is set above the equilibrium wage rate, the number of hours of labor employed is determined by the ________ and the ________.

A sales tax on sellers of a good shifts the demand curve leftward because the tax raises the price that consumers must pay.

-In the above figure, who pays the larger share of the tax?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

The buyers pay the entire sales tax levied on a good when demand is perfectly or supply is perfectly .

When the minimum wage is set above the equilibrium wage rate, the number of hours of labor employed is determined by the and the .